Inside the Port with Dr. Noel Hacegaba

Dr. Noel Hacegaba 00:51

Thanks for having me, Justin. A pleasure to join you.

Dr. Noel Hacegaba 01:23

First of all, there are a number of different models for port authorities across the country, really around the globe. Here in California, most ports are considered landlord ports, which means that we as a port authority are responsible for developing, managing, and maintaining land and the structures that we build on that land. And our business model is very similar to a real estate development company. We generate revenues based on long-term leases that we enter into with private parties that use the facilities we build to manage a container terminal operation. You mentioned earlier that there are two ports right next to each other and you're right. In the San Pedro Bay, we're known internationally as the San Pedro Bay Ports Complex. If you were to look at that complex from an aerial look, if you will, you'll see that there's the Port of Los Angeles to the west, the Port of Long Beach to the east. We're literally right next to each other. there's a political boundary that that separates the jurisdiction and what separates us is as you pointed out the Port of Long Beach is a department of the city of Long Beach and the Port of Los Angeles is a department of city of Los Angeles and so we are governed under a municipal government structure and that's the way that our ports here in Southern California at least at least in Los Angeles and Long Beach are governed. Now Now together, just to add to what you were asking about, we are a massive economic engine. We are America's gateway, Justin. 40 % of all waterborne imports enter the country through our complex. So we are literally an asset of national significance.

Dr. Noel Hacegaba 03:42

Yeah. I'll tell you what, for most of our history, ports were invisible and no one really thought about ports. They really didn't think what a port was until the pandemic, when folks went to the store to buy a product and they noticed that the store shelves were bare or they went to an appliance store and the store clerk told them that there was a shortage and that the appliances were six to nine months delayed. And when the customer asked, well, where is it? Let's stuck somewhere on a ship at the port. All of a sudden, people started making the connection between ports, supply chain, goods movement, and day-to-day living because not only do we move in LA Long Beach together about 20 million container units a year, but all those containers, Justin, that cross our docks on an annual basis, they've reached all 435 congressional districts. We literally power the economy. Between the two ports, we move about $600 billion worth of goods.

Dr. Noel Hacegaba 04:42

on an annual basis. So this really is a massive economic engine that powers every single sector industry including and especially I would say the commercial industrial real estate space.

Dr. Noel Hacegaba 05:00

Yes. Yeah. Yes. Well, so we have 22 terminals at the Port of Long Beach. Six of them are containerized terminals. In other words, they process containerized containers. We also have terminals that move cars. We call them row row operations, roll on, roll off. We have brake bulk. We have liquid bulk, your petroleum energy products. We do have special cargos and bulk terminals. These terminals process and specialize in processing product that doesn't fit inside a container. So combined, we, what's that? Yes.

Dr. Noel Hacegaba 06:06

Yeah. Exactly. So they're one of our long time tenants. so and they're a major exporter of scrap and waste metal, for example. But yeah, I mean, we are considered a diversified port, even though the containerized line of business for us accounts for about three quarters of our revenues. We are diversified. We're also strategic seaport. And there are only 13 ports across the country that have been designated such by by the Department of Defense. so that's something that sets us apart. But to answer your question, each of these terminals have a lease with us. And a big part of what we do is to manage those leases, make sure that. We are complying with the requirements of these leases that our tenants are complying with the terms of the leases. We're constantly in churn and making sure that we're having discussions about potential renewals, extensions, redevelopment projects, for example. So there's always activity on the real estate front. And to answer your question about what entities or what companies, we work with the world's Major players when it comes to ports and logistics. mean we we have, for example, we work with the world's top shipping lines. One of our big terminals is owned and operated by MSC Mediterranean Shipping Company. They happen to be the world's largest ocean carrier by by tonnage by volume. We also have relationships with two terminals that are owned by McCrory Infrastructure. Partners. which is a sort of an emerging model where you see private infrastructure funds that are coming in that don't necessarily have a relationship with an ocean carrier, but yet invest in the marine terminal space. And then we also have partnerships with SSA Marine, for example. They're a traditional stevedore. That's what they do. Their core mission is to operate container marine terminals. And they are owned by a company that is owned by Blackstone, right? So you have a mix of different entities and ownership structures, but again, we attract the world's biggest players as it relates to real estate.

Dr. Noel Hacegaba 08:46

Yeah, most of the time our partners, our tenants, they want to stay here at the Port for the long haul. And so they're constantly thinking about the future and how they can grow their footprint and grow their business here.

Dr. Noel Hacegaba 11:01

You're asking all the right questions, Justin. Let me start by saying this. You're right. Historically, ports and our container volumes have been considered pretty accurate indicators or barometers of the overall economy. And that's because containerized moves reflect the demand for imports, right? And we've been very fortunate that as manufacturing has evolved and emerged in China and across Asia, we are we are strategically located here in the Southern California to capture all that transpacific cargo, right? So for example, the 9.6 million TEUs that we had in last year, to put that in perspective, about two thirds of that cargo eventually ends up east of the Mississippi. Only about a third is what we call local cargo, which means that it stays in the five county region here in Southern California. Now, the balance, two thirds, about 25 % of that leaves for the hinterland directly from the port. That's what we call on dock rail. And in fact, over the next 10 years, we're going to be investing aggressively in our rail capacity so that we can move more boxes directly from the ship. to a train just because it's more efficient, it's more sustainable, it's safer, right? And so the balance, right? The difference between the two thirds and the 25 % is all transloaded, right? These are boxes that either go to a nearby rail yard or they go to the Inland Empire or they go to some warehouse where the contents are removed and then they're repackaged in a different container. And then they eventually end up on a train somewhere east. That's Probably the most accurate way to describe it. The numbers obviously shift from year to year. We think that in the future, Justin, there will be more container moves, more rail moves, just because that seems to be, in most cases, the most cost-effective way to get goods into key markets like Chicago, Memphis, Kansas City, Dallas, and some of the other key markets that you mentioned.

Dr. Noel Hacegaba 13:26

Yes. Yeah, as a matter of fact, during the pandemic, I should tell the story. We when we had 109 ships at anchor, right? And you might remember that you could see the queue of ships all the way down Orange County and we were getting phone calls from members of Congress in Ohio.

Dr. Noel Hacegaba 13:49

in Nebraska who were calling on behalf of their constituents who were telling us I need that container because it contains parts and supplies that we need to run the businesses and the factories there. And that's when all of sudden people were connecting the port to the broader economy and how reliant our national economy is on ports. And that's why I like to say that we went from being invisible to being infamous because everyone was blaming us for the delays and all of sudden we became important, right?

Dr. Noel Hacegaba 14:20

I think today most people have a better understanding and appreciation for supply chain, for goods movement. mean the goods movement is literally the economy in motion.

Dr. Noel Hacegaba 14:39

Yeah. Yes. So over the next 10 years, and let me, I should start by saying this, that over the past 15 years, we have invested over $5 billion. This bridge that you see in my background is one of those projects. It came at a price tag of about $1.6 billion. And we delivered this in 2022. We also delivered a major terminal that happens to be the greenest and one of the most technologically advanced terminals in North America. We delivered that in 2022 as well. And so a lot of our investments have been focused primarily on upgrading our infrastructure, expanding our capacity, making sure that we're meeting the demands of our ocean carrier customers who, by the way, over the last 15 years have been invested investing in bigger and bigger ships, right? So it's a race to see which port authority has a capacity to handle these bigger ships. But over the next 10 years, we are going to be investing aggressively in rail because we believe that our key to success going forward as our market sure continues to grow is we need to move more containers on train versus truck. We're always going to need trucks. The number of trucks that call the port will never diminish. They will only increase over time. but we need to shift the ratio so that we can maximize the real estate that we have to work with here at the port. And this is why the centerpiece of our CAPEX program over the next 10 years is a project we call Pier B. It's the Pier B on-dock rail support facility. I affectionately refer to it as Pier Beast because it's such a complex project, but it also is known as America's Green Gateway. That's how it was known when we received a grant from the federal government in 2023 to the tune of over $300 million. And that investment alone, Justin, is going to enable us to move to dramatically increase our what we call our on-dock rail capabilities. That means we'll be able to nearly double the number of containers that we move directly from a ship to a train and into the interior of the country.

Dr. Noel Hacegaba 17:06

I would say that most right now there's no congestion. There are no delays, no congestion, no backlogs. I just want to be very clear. But in the past, where we've run into issues is when we've had local cargo and intermodal cargo that were sitting in the same yard. And when you have to manage

Dr. Noel Hacegaba 17:29

two different sets, if you will, of containers that are going different directions, it could create issues when you're at capacity. Now, thankfully right now, our terminals are at about 75%. So we don't have that issue. But we did have the issue during the pandemic, right? But right now, we don't have any bottlenecks. Thankfully, all of our partners, our terminal operators, our mighty ILWU workforce, everyone, everyone is working at full clip. And we are

Dr. Noel Hacegaba 17:58

handling record volumes despite the tariffs, despite shifting trade policies, and without any congestion, backlogs, or delays.

Dr. Noel Hacegaba 18:43

Let's just say it, mean, it's the uncertainty, right, that it creates and that permeates across the economy. It makes it harder and more risky for businesses to hire, to invest, to plan for the long term. You know, here at the Port Justin, I mean, our hallmark, one of the reasons we've been so successful is because we've been very disciplined in our planning, very disciplined in executing. And even during the pandemic, we continue to build. Even now, we continue to build. And when you play the long game in the end, right? I mean, at some point, the trade policy discussions, the tariff situation, at some point it will all resolve itself. Right now we need to make sure that five, 10, 15 years from now when the customers come to use a port, we need to make sure that we meet their needs and make sure that we offer the best, greenest, most efficient, safest infrastructure and facilities to keep the economy moving.

Dr. Noel Hacegaba 20:30

That's a great question. We're doing a lot. So for our motor carrier partners, Justin, we are in the process of deploying. We've designed it. It's a matter of deploying what we call a universal truck appointment system. currently, at each of our six container terminals in order for a motor carrier to go pick up a container, they have to make a reservation. They have to make an appointment. And right now, you have to go to six different systems or websites to book an appointment. Now, you tell me whether that is the most efficient way or not. And so that leads to a lot of challenges, right, both for the motor carrier and for the terminal. For the terminal, because the motor carrier wants to maximize the number of pickups and drop-offs. What they do is they often, not everyone, but a lot of them book appointments across the board, knowing that they may miss one or two, right? The terminal on the other hand is they're managing their operations according to those reservations. So if they do have a missed appointment, that's a container that's not gonna be picked up that day, right? And then for the motor carrier again, it's not the most efficient. So this universal truck appointment system, which we developed leveraging our supply chain information highway. That's our technology, that's our digital platform that we developed to unleash the power of data sharing and maximize visibility, velocity and value. And so that is going to enable our partners to book appointments across each of these container terminals. But it gets better, Justin, because as I explained at the top of our interview, the Port of Los Angeles is literally next door. So our vision in the future is to have a complex-wide appointment system so that these trucking companies can book appointments at terminals at the Port of Long Beach and the Port of Los Angeles. So that's something we're doing now. a lot. No.

Dr. Noel Hacegaba 22:36

Exactly, and we're leveraging technology to help us get there. And we're also doing a lot in the transition of zero emissions trucks. I can tell you that we are offering incentives to help companies transition to zero emissions trucks. We are installing the highest number of truck charging stations of any port in the world. Right now, we have 150 charging stations in the Port Olamitch alone. We're going to be installing another 150 over the next 18 months, right? And all in an effort to incentivize and accelerate the transition. We're also in the process of deploying what we call green lanes, where we incentivize

Dr. Noel Hacegaba 23:13

they use of these cleaner trucks, these zero emissions trucks. And so again, we're doing a lot of it. Yes, yes. And here's what's great about this because I know that some of your members...

Dr. Noel Hacegaba 23:27

are doing the same out in the Inland Empire, they're doing the same across Southern California, right? So together, we're building a network of infrastructure to charge, right? So think about this, when that truck comes from the Inland Empire, they can charge here. When that truck goes back to the Inland Empire, they can charge there. And so it's a great way to synergize our mutual investments to make sure we're offering our motor carriers the best for this possible.

Dr. Noel Hacegaba 24:04

Yeah. Yeah. Yeah, we're not seeing a lot of that just yet. And part of it is because you got to remember that these these dredge trucks, their duty cycle and the weight they have to carry. It takes a lot of horsepower. And think about it. It's horsepower that's powered either by hydrogen fuel cell or by a battery. So there isn't a lot of... There aren't many options just yet, but I expect that in the coming years, you will see, for example, in the future, you might see hydrogen powered trucks. We already have some hydrogen fuel cell powered trucks. In the future, you'll see more of that. But right now, we're doing everything that we can to accelerate the transition to cleaner trucks.

Dr. Noel Hacegaba 25:10

We do. For better or for worse.

Dr. Noel Hacegaba 26:03

Yeah, so the supply chain information highway was primarily designed a few years ago, Justin, to give visibility to all the partners in the supply chain. Believe it or not, and we learned this the hard way during the pandemic, we had shippers and their drayage companies that had zero visibility. In some cases, they didn't know when their container was going to arrive on which ship and when it was going to be discharged from the ship. And so this was our attempt at helping to close the gap on visibility. And we weren't trying to reinvent the wheel. We weren't trying to invent something that would replace the systems that our partners use. This was designed as a way to integrate the different platforms, the different technology solutions so that there would be one common core or for all that data. And by the way, I should note this as well. We're not talking about proprietary information. We would never release information that was proprietary. But we would simply make basic data points about container status. When does a ship arrive? When is that container going to be discharged? When is it ready for delivery, right? And by developing that system and unleashing data sharing so that everyone who needs it has access to it, You know, we're basically improving the flow of data. And when you inflow, when you improve the flow of data, you're essentially and effectively improving the flow of containers. And that's that's really the goal. So this universal truck appointment system that I described, that's really a bolt on. Right. The foundation of the supply chain information highway was to give a baseline view of the containers when they arrive, when they're off the ship, when they cross the gate, when they're ready for pickup.

Dr. Noel Hacegaba 27:58

Yeah, that's right.

Dr. Noel Hacegaba 28:35

So automation is already present at our port. There is one automated terminal in Long Beach, one in Los Angeles. Neither of them is fully automated, right? Both of them still require human power for different functions, different parts of the operation. Most of our terminals are what we call conventional, which means that there's no automation. They all require human intervention. I will tell you this, that We have been setting our one of the terminals, one of the largest terminals in Long Beach, has been setting record after record after record and that's everything from rail operations to shore crane operations, every facet of marine terminal operations and that's been a conventional turmer. And I point that out because it shows what a conventional terminal can do, what potential it has to do. And it's been setting records, Justin. I mean, it's been beating some of these other automated operations. Ultimately, the decision to automate or not is not ours. That is the decision of the terminal operator. and what operating system they feel is best for their operation. But I can tell you that as a Port Authority, you know, we recognize our role as an economic engine. I I shared a couple of numbers early on about the number of jobs that we generate. In Southern California alone, Port of Long Beach generates nearly 700,000 jobs, almost 3 million jobs across the nation. We're very passionate about that because we recognize that The goods movement is literally the economy in motion and we take our role as an economic engine, as a job creator very, very seriously. I will also say that we're very passionate about investing and attracting the next generation of port leaders. This is why we've partnered with our Long Beach Unified School District, California State University Long Beach, Long Beach City College, and we've created three pathways, Justin, at three different high schools to attract

Dr. Noel Hacegaba 30:47

youth as young as high school age to careers in goods movement logistics. And so we're doing our part, right? Because we know that as we build the port of the future, we need to make sure that we are preparing the workforce of the future. And let me also say this, we would be nothing without our workforce. During the pandemic, our IOWD dock workers showed up, they messed up. We never had to shut the port down. Our truck drivers, our rail operators, our mechanics, everyone up and down the supply chain, our warehouse workers, everyone who powers the supply chain is keeping the economy moving. So I always like to say that because it's important to understand just how critical the workforce is to our operation. Yes.

Dr. Noel Hacegaba 31:50

Mm-hmm.

Dr. Noel Hacegaba 32:07

Yeah. Yeah, well said.

Dr. Noel Hacegaba 32:27

Yeah. Sure. I think. You know, Justin, there's an expression in our industry. When you've seen a port, you've seen a port because we're all so different, right? We may be similar and we may resemble one another, but we're all so different. You know, I'm a port nerd. Any city I visit that has a port, I like to visit. I like to tour it. I like to see it and talk to the people who work there. So obviously, my favorite port is the Port of Long Beach. That's our home port.

Dr. Noel Hacegaba 33:10

Okay, well, and look, I we collaborate very, closely with the Port of Los Angeles. That's another great port. You know, we collaborate very well with them on virtually every every issue you can imagine, environment, security, common infrastructure. I visited the port of Seattle Tacoma as well, beautifully situated near their near the city skyline. I've been at other ports across the country like South Carolina Ports Authority. I don't have a favorite because like I said they're all so unique and so different and then when you see them in their environment in the backdrop of those cities it just like I said I'm a port nerd and so

Dr. Noel Hacegaba 34:03

Well, that's right. It's like asking me, what's your favorite Beatles song, right?

Dr. Noel Hacegaba 34:28

Yeah, Miami, for example, there's just so many ports and around the world. I haven't even mentioned the international ones, but I mean, when you see ports around the globe, you just marvel at the scale at the size. And I mean, some of these ports look they look like cities. I mean, they're that vast and that huge.

Dr. Noel Hacegaba 35:11

Go. Yeah. You know, I would say, you know, as disruptive as a tariff situation is, I believe that that's going to work itself out. I don't don't I don't see that as a long term issue. That's more of a near term issue. And so the guidance I've offered those who asked me is just stay calm, right? Don't overreact. Obviously, you're going to have to mitigate the risk as best you can, try to control your destiny as best you can, but don't overreact, right? Don't overhype because we saw that during the pandemic. We went from a just-in-time delivery system to a just-in-case, and that basically, that's what gummed up the supply chain, to be honest with you. We had way too much cargo for a supply chain that was limited and constrained by the pandemic. Something that I'm long on is our transition to zero emissions operations. It's happening and it's going to continue to happen, Justin. I I see it all across the supply chain, not just at the ports, but I see it across the industry. The other thing that I'm also long not impassioned about is workforce development. I think every sector in every industry can do more and should do more to make sure we're doing our part to prepare the next generation of workers. And that's something, you know, we're going above and beyond our core mission here at the port to invest in our high schools or community college, our university. But I think that's an area where I think a lot more work can be done. So I would encourage your viewers, your members to consider being a part of that, right? Join forces with your school districts, with your your community colleges, your universities, look for ways to mentor, to invest in generating scholarships to attract bright people to our industry, because we're going to need them.

Dr. Noel Hacegaba 37:09

Yes, you guys have, yes, yes. And let me also give a quick shout out to my teammates who spoke at your recent conference who made this opportunity available. That's Lily and Michelle, and I wanna give a quick shout out to them as well. They do excellent work.

Dr. Noel Hacegaba 37:32

Yeah. You got it. Thanks again for having me, Justin. Wish you all the best. Thanks. Bye bye.